The ideal biological imaging system would provide non-invasive, high-resolution, high-sensitivity, three-dimensional (3D) images of living systems. Positron Emission Tomography (PET) offers high sensitivity to a range of biological processes through the use of targeted radio labeled probes. Unfortunately, precise signal localization can be extremely difficult due to low spatial resolution and the lack of anatomical information. Magnetic Resonance Imaging (MRI) can provide high spatial resolution and excellent soft tissue contrast, but suffers from poor signal strength leading to low sensitivity. The overall goal of the proposed effort is to combine the best features of PET and MR modalities for small animal studies into a single, very high performance imaging instrument that will record data in both imaging modalities simultaneously. The most obvious benefit of the integrated system will be to provide high-resolution anatomical context for small-animal PET studies. This will lead to better overall understanding of the origin of the PET signals. The 'in-register' MR images can be used to estimate partial volume errors in the lower-resolution PET scans, thus aiding quantification of the PET signal. To achieve these objectives, a high resolution, high sensitivity PET system will be designed and built and will be tested first on a bench, followed by detailed evaluation inside a commercial small animal MR imaging system.